Inheritances suck because usually someone died or got seriously injured and that’s why the inheritance is even a thing.
I received an inheritance when I was 12 years old, although I couldn’t really do anything with it until I reached the age or majority. One of the only good things that happened was that I did actually – eventually – receive the inheritance, otherwise, it’s been a nightmare. From people trying to take it to others not giving the money to me.
Any of the adults I talked to told me something along the lines of not to touch the money because I’ll lose it and to let “the guys” handle the money (the guys were the trustee, a financial advisor, and a few other people whom have – and still do have – my best interest in mind, although they show it a tad different then others.)
Anyway, I got this sum of money and for years it was a burden more than anything, stressing me out and causing a ton of worry, fears, and insecurities. I was feeling immense pressure and all eyes were on me waiting for me to fail.
And this went on for years with most of the time this lump sum just sitting in a bank account – how could I lose it if I don’t spend it or touch it and make sure its FDIC insured?
I knew I wanted to do something with this money, to grow it, enough to take me to financial freedom and within those years of the funds sitting in a bank account, I went on a hunt to find answers.
This research dug up investment vehicles like stocks, bonds, mutual funds, real estate, gold and all their subcategories, day trading, crypto, options, etf’s, single family, management, multifamily and thousands of others.
And this person said this, which was the opposite of that person saying that…
so this leads us to the answer to our question:
What do I do with an inheritance? It depends. Here are three things to keep in mind.
- What’s the goal with this inheritance? Mine is to give me a jump start towards financial freedom so I can create the life I want to live. Therefore I developed the mindset that this lump sum of money is a golden goose. The golden goose produces golden eggs which is the cash being kicked out to me from investments. We never want to kill the golden goose, only love her and slowly fatten her up, and as long as the golden goose is alive, the golden eggs will keep on coming.
- Travel
This may go against the grain of the whole financial freedom thing but one that pays dividends in the years to come.
See, most people will say get out of bad debt or pay off your home for this next step. The reason I would say not to take this route is two-fold:
- First, bailing oneself out of debt isn’t doing anyone any good. The reason we got into debt was because of bad money habits. I’d recommended getting out of debt via working income to practically learn what’s going on. (The debt snowball helped us pay off $20,000 in three months.)
- Secondly, paid off homes give peace of mind which is great, but if you already have a 3% loan on your home, there may be other strategies able to be implemented that can decrease that loan term (like two mortgage payments a month, a little extra payment, etc), and increase returns.
Depending on the size of the fund will determine what kind of splurge to go on. I spent about 5% of the portfolio on a 6 month travel binge.
And if you really can’t make the travel thing happen, which I know you can, I’d work on step three.
- Investment vehicles. In order for this money to grow, it needs to be invested, and all investments are different. The main categories are stocks, bonds, alternatives (think gold, real estate, paintings, etc.)
It’s important to note that investment vehicles are better for some than others.
The average person may find value in living the same exact life they’re living and just following the “core and explore” method, which is putting 80% of the money to an index fund and 20% into exploring into other types of investments that may be of interest.
The index fund is providing us with asset allocation, which is highly important for investment returns. (it’s just a fancy way of saying what percentage of our money is here, here, here, etc.)
The core and explore route is perfect for the person who doesn’t want to do anything differently in their life and just have the funds sit in an account to be enjoyed in the retirement years.
As for me, I loved everything about real estate and am using this investment vehicle to take me towards financial freedom, and sharing my goals, strategies, and tactics to get there is what I intend to share with you all.
Remember: there is no getting rich quick, slow is smooth and smooth is fast.
Joe DiAndrea 